TaxTMI 
TaxTMI 
TaxTMI 
2025 (3) TMI 1626
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.... (Inv.), Kolkata that the shares of M/s Shreenath is held to be a penny stock and the prices of the said scrip are manipulated to generate bogus LTCG. The AO noticed that during the year under consideration, the assessee has traded in the shares of M/s Shreenath which resulted in the Capital Gain which has been claimed as exempt under section 10(38) of the Act. The AO accordingly reopen the assessment by issuing notice under section 148 of the Act. The AO issued a notice under section 143(2) calling on the assessee to furnish various details. The AO also issued summons and recorded the statement from the assessee with regard to the trading in shares carried out by him of the alleged penny stock. The assessee furnished various details such as the return of income, balance-sheet, Profit & Loss A/c, broker statement, bank statement, Demat A/c, etc. before the AO. The AO did not accept the submissions of the assessee and proceeded to treat the entire sale consideration as unexplained to make an addition under section 68 of the Act. The AO also made an addition towards commission under section 69C of the Act at 2% of the sale consideration. On further appeal, the CIT(A) confirmed the ad....
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.... the DDIT (Inv.), Kolkata, the movement of price of the impugned scrip and the analysis of the alleged cash credit. However, the AO has not accorded any finding where the assessee is linked to the alleged bogus transactions involving price rigging or the cash trade. It is also relevant to note that the AO has not recorded any adverse finding with regard to the various documents submitted by the assessee and has simply stated that the assessee failed to discharge the onus. We notice that the Co-ordinate Bench of the Tribunal in the case of Mrs. Pallavi Mayur Gandhi vs. ITO (ITA No. 2251/Mum/2022 dated 19.04.2023 has considered the issue of a LTCG arising out of transfer of M/s Shreenath being treated as unexplained under section 68 of the Act and held that "13. We heard the rival contentions and perused the record. We noticed that the assessee has furnished all the details in support of purchase and sale of shares of M/s Shreenath Commercial & Finance Ltd and the said fact has been recorded by the AO in paragraph 2.5 of the assessment order. We noticed that the assessee has purchased the shares through preferential allotment and the said shares had lock in period of one yea....
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....firming the transaction, that the Appeal of the Assessee has been rightly allowed. The Tribunal has not merely interfered with the concurrent orders because another view was possible. It interfered because it was required to interfere with them as the Commissioner and the Assessing Officer failed to note some relevant and germane material. In these circumstances, he submits that the Appeals do not raise any substantial question of law and deserve to be dismissed. 5. We have perused the concurrent findings and on which heavy reliance is placed by Mr. Sureshkumar. While it is true that the Commissioner extensively referred to the correspondence and the contents of the report of the Investigation carried out in paras 20, 20.1, 20.2 and 21 of his order, what was important and vital for the purpose of the present case was whether the transactions in shares were genuine or sham and bogus. If the purchase and sale of shares are reflected in the Assessee's DMAT account, yet they are termed as arranged transactions and projected to be real, then, such conclusion which has been reached by the Commissioner and the Assessing Officer required a deeper scrutiny. It was also revealed....
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....ing it to be converted into accounted or regular payment. The discrepancy pointed out by the Calcutta Stock Exchange regarding client Code has been referred to. But the Tribunal concluded that itself, is not enough to prove that the transactions in the impugned shares were bogus/sham. The details received from Stock Exchange have been relied upon and for the purposes of faulting the Revenue in failing to discharge the basic onus. If the Tribunal proceeds on this line and concluded that inquiry was not carried forward and with a view to discharge the initial or basic onus, then such conclusion of the Tribunal cannot be termed as perverse. The conclusions as recorded in para 12 of the Tribunal's order are not vitiated by any error of law apparent on the face of the record either. 7. As a result of the above discussion, we do not find any substance in the contention of Mr. Sureshkumar that the Tribunal misdirected itself and in law. We hold that the Appeals do not raise any substantial question of law. They are accordingly dismissed. There would no order as to costs. 8. Even the additional question cannot be said to be substantial question of law, because it aris....
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....hat the identical allegation of non-genuine long term capital gains generated on sale of M/s Shreenath Commercial & Finance Ltd was examined by the co-ordinate bench in the case of Mr. Ripu Sudan Kundra vs. Mrs. Pallavi Mayur Gandhi ITO (ITA No. 2792/Mum/2018 dated 05-10-2021), wherein it was held as under: - "We have given our anxious thought and consideration to the matter in hand. The AO has disallowed the claim of the assessee based on analysis of the information received from Directorate of Investigation as a result of enquires undertaken by the officers of the Directorate. Based on the said information received, the AO has observed a pattern in the trading in scripts of those companies that has resulted in the claim of short-term capital loss to the assessee. Such companies were seen to have little financial credentials, no profitability, and no apparent explanation for abrupt rise in prices followed by a steep fall in price of shares. Besides, there are statements of brokers/ entry providers who have accepted that they were involved in the scam of price rigging to facilitate accommodation entries to beneficiaries who have routed their unaccounted cash into the books....
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....lied upon were not provided, when there was no opportunity Mrs. Pallavi Mayur Gandhi 11 to cross examine those witnesses whose statements were relied upon by the AO to conclude that the transaction in question was part of penny scam, we have no hesitation in holding that the lower authorities erred in disallowing the claim stating that the assessee failed to provide cogent and convincing reply to the allegations raised. We observe from the record that in identical situation the Coordinate Bench of ITAT in ITA Nos. 4843 & 1228/Mum/2018 for Assessment Year 2013-14 & 2014-15 in the case of Ramprasad Agrawal Vrs. ITO (reported in [2018] 100 taxman.com 172 - Mum Trib) and Kamla Devi S. Doshi vrs. ITO reported in 88 taxmann.com 773 (Mum-Trib) decided the issue in favour of the assessee on merits. From the above decision, it is trite that denial of such crucial rights is a fatal flaw that renders the assessment order a nullity. An assessment purely based on suspicion, surmises and conjectures without any tangible evidence on record against the assessee of any connivance or collusion is unsustainable in law." 16. In the instant case also, we noticed that the AO has simply relied u....
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....o for the reason that the facts are identical. Accordingly we hold that the addition made by the AO by merely placing reliance on the report of the Investigation Wing without recording anything connecting the assessee to the alleged bogus transactions cannot be sustained. We therefore direct the AO to delete the addition made under section 68 of the Act. AY 2014-15 & 2015-16 9. During the years under consideration the assessee has sold the alleged penny stock of M/s Parag. For AY 2014-15 the assessee sold 27000 shares and during AY 2015-16 the assessee sold 98000 shares. The AO made the addition under section 68 based on the report of Investigation Wing. The CIT(A) confirmed the addition made by the AO. 10. We heard the parties and perused the material on record. We notice that the assessee with regard to the impugned transactions has produced the various documents such as the broker note, bank statement, Demat A/c statement, balance- sheet, P&L A/c, etc. before the AO for both the AYs. We further notice that the assessee has made STCG and LTCG on sale of various scrips the details of which were also furnished before the AO (page no.11 & 12 for AY 2014-15 and 29 to 36 for ....
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....by SEBI at all. We notice from the statement recorded by the AO from the assessee u/s 131 of the Act that the assessee was able to answer all the technical details relating to stock market. 7. We notice that the assessee has furnished all documents evidencing the purchase and sale of shares, i.e., the assessee has (a) purchased these shares by paying consideration through banking channels (b) dematerialized the shares and kept the same in the Demat account. (c) sold part of the shares through stock exchange platform (d) received the sale consideration through banking channels. Further, the shares have entered and exited the demat account of the assessee. We notice that the AO himself has not found any defect/deficiencies in the evidences furnished by the assessee with regard to purchase and sale of shares. The assessee and its broker were not subjected to any enquiry by SEBI, meaning thereby, the transactions were carried on by the assessee during the normal course of investment in shares. As noticed earlier, the AO has not brought on record any material to show that the assessee was part of the group which involved in the manip....
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..... While it is true that the Commissioner extensively referred to the correspondence and the contents of the report of the Investigation carried out in paras 20, 20.1, 20.2 and 21 of his order, what was important and vital for the purpose of the present case was whether the transactions in shares were genuine or sham and bogus. If the purchase and sale of shares are reflected in the Assessee's DMAT account, yet they are termed as arranged transactions and projected to be real, then, such conclusion which has been reached by the Commissioner and the Assessing Officer required a deeper scrutiny. It was also revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange records showed that the shares were purchased for code numbers S003 and R121 of Sagar Trade Pvt Ltd. and Rockey Marketing Pvt. Ltd. respectively. Out of these two, only Rockey Marketing Pvt. Ltd. is listed in the appraisal report and it is stated to be involved in the modus-operandi. It is on this material that he holds that the transactions in sale and purchase of shares are doubtful and not genuine. In relation to Assessee's role in all this, all that the Commissioner observed ....
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....he Tribunal cannot be termed as perverse. The conclusions as recorded in para 12 of the Tribunal's order are not vitiated by any error of law apparent on the face of the record either. 7. As a result of the above discussion, we do not find any substance in the contention of Mr. Suresh kumar that the Tribunal misdirected itself and in law. We hold that the Appeals do not raise any substantial question of law. They are accordingly dismissed. There would no order as to costs. 8. Even the additional question cannot be said to be substantial question of law, because it arises in the context of same transactions, dealings, same investigation and same charge or allegation of accommodation of unaccounted money being converted into accounted or regular as such. The relevant details pertaining to the shares were already on record. This question is also a fall out of the issue or question dealt with by the Tribunal and pertaining to the addition of Rs. 25,93,150/-. Barring the figure of loss that is stated to have been taken, no distinguishable feature can be or could be placed on record. For the same reasons, even this additional question cannot be termed as substantial....
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.... It is pertinent to note that the purchase of shares made in an earlier year has been accepted by the revenue. The sale of shares has taken place in the online platform of the Stock exchange and the sale consideration has been received through the stock broker in banking channels. Hence, in the facts of the case, the sale consideration cannot be considered to be unexplained cash credit in terms of sec. 68 of the Act. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition of sale consideration of shares made u/s 68 of the Act and allow the exemption claimed u/s 10(38) of the Act." 11. Considering that the facts are identical, we are of the considered view that the addition made by the AO by merely relying on the findings of the Investigation Wing without recording any adverse finding on the various documents filed by the assessee or without recording any finding connecting the assessee to be alleged bogus transactions is not tenable. Accordingly we direct the AO to delete the addition made in this regard for both AYs 2014-15 and 2015-16. 12. In result, the appeal of the assessee for AY 2013-14 to 2015-16 are allowed. O....
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....vt Ltd (Broker and Depository). 6. Copy of holding statement as on 31-03-2013 in Demat Account with Nariman Finvest Pvt Ltd (Broker and Depository). 7. Copy of Transaction statement from 01-04-2010 to 31-03-2014 for Demat Account with Nariman Finvest Pvt Ltd (Broker and Depository). 8. Copy of Ledger A/c for FY 12-13 of Nariman Finvest Pvt Ltd (Broker and Depository). 9. Copy of holding statement as on 31-03-2012 in Demat Account with HDFC Bank (Depository ). 10.Copy of holding statement as on 31-03-2013 in Demat Account HDFC Bank (Depository ). 11.Copy of Transaction statement from 01-04-2010 to 31-03-2013 for Demat Account with HDFC Bank (Depository). 12.Copy of Ledger A/c for FY 12-13 of Androit Financial Services Pvt Ltd (Broker). 13.Copy of all Broker Notes for Sales and Purchase of shares in FY 12-13. 14.Copy of all Broker Notes for old Purchase of shares for which LTCG is claimed in AY 13-14. Please take the above documents into your record. In case any further information is required, please let us know. Thanking you, Yours faithfully, For P.G. JAIN & CO. Chartered Accountants Proprietor Encl: As Above Document 2 STATEMENT OF SHORT TE....
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....10 22.3.13 500.00 Nos 854.13 427065.00 500.00 Nos 508.68 254340.00 427085.00 -172725.00 Andrew Yule (Nb) 08.07.10 22.3.13 15000.00 Nos 37,55 563269.46 15000.00 Nos 12.44 186587.20 563289.46 378682.28 Biocon Ltd (A) 05.11.2010 24.9.12 500.00 Nos 436.77 218364.33 500.00 Nos 277.65 138825.00 218384.33 -79559.33 CENTRAL BANK (N) 18.08.11 22.3.13 4000.00 Nos 103.40 413586.50 4000.00 Nos 66.23 264920.00 413586.50 -148888.50 ELECT STEEL(N) 26.03.08 22.3.13 5000.00 Nos 39.65 198250.00 5000.00 Nos 16.05 80250.00 198250.00 -118000.00 GABRIEL (N) 05.11.2010 22.3.13 1000.00 Nos 68.17 68170.00 1000.00 Nos 19.10 19101.35 68170.00 -49068.65 GABRIEL (N) 09.11.2010 22.3.13 4000.00 Nos 66.99 267959.40 4000.00 Nos 19.10 76405.40 267859.40 -191554.00 GRASIM INDUS (N) 08.6.10 26.9.12 300.00 Nos 1885.08 565523.00 300.00 Nos 3220.93 966279.00 565523.00 400756.00 GUJ STATE PETRO 06.08.10 22.3.13 2000,00 Nos 109.27 218540.00 2000.00 Nos 61.84 123680.00 218540.00 -94880.00 GUJ STATE PETRO 18.11.11 22.3.13 2000.00 Nos 92.48 184960.00 2000.00 Nos 61.84 123680.00 184960.00 81280.00 GUJ STATE PETRO 30.06.10 22.3.13 2000.00 Nos 101.98 203960.00 2000.00 Nos 61.84 123680.00 203960.00 ....
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....CHASE VALUE SALES REALISATION NAVNEET PUBL (N) 26.10.2010 08.01.13 5000.00 Nos 65.45 327265.60 5000.00 Nos 66.78 333919.38 327265.60 6653.72 NEYVELI LIG (N) 21.01.10 22.03.13 5500.00 Nos 170.42 937299.36 5500.00 Nos 64.59 355245.00 937290.38 -682045.38 Nhpc (N) 29.03.2011 29.01.13 25000.00 Nos 23,51 587750.00 25000.00 Nos 26.63 665750.00 587750.00 78000.00 Punj Lloyd (N) 16.02.12 22.03.13 10000.00 Nos 63.70 636972.20 10000.00 Nos 43.54 435400.00 636972.20 201572.20 RANBAXY (A) 31.01.2011 24.09.12 500.00 Nos 545.02 272509.05 500.00 Nos 523.97 261983.21 272509.05 -10525.84 Ranbaxy Labo (N) 29.03.2011 26.09.12 500,00 Nos 432.58 216290.00 500.00 Nos 536.68 268337.50 216290.00 52047.50 Ranbaxy Labo (N) 31.03.11 26.09.12 1000.00 Nos 433.63 433631.40 1000.00 Nos 536.68 536675.00 433631.40 103043.60 RICOAUTO (N) 05.11.2010 22.03.13 2000.00 Nos 27.77 55534.40 2000.00 Nas 6.02 12032.83 55534.40 -43501.57 RICOAUTO (N) 09.11.2010 22.03.13 3000.00 Nos 28.12 84360.00 3000.00 Nos 6.02 18049.24 84360.00 -66310.76 RICOAUTO (N) 10.11.2010 22.03.13 20000.00 Nos 29.08 581290.40 20000.00 Nos 6.07 120328.29 581290.40 -460962.11 RICOAUTO (N) 26.10.2010 22.03.13 10000.00 N....